ACCA Applied Knowledge · Financial Accounting · Incomplete records
At 1 January a sole trader had assets of $48,000 and liabilities of $18,000. During the year he introduced no new capital and withdrew $9,000 for private use. At 31 December, net assets were $52,000. What was the profit for the year?
Profit is $31,000. Opening capital was $30,000 and closing capital $52,000, an increase of $22,000. Because the owner withdrew $9,000, profit must have been higher than the increase in net assets, so drawings are added back to give $31,000.
- A$22,000Correct
- B$13,000
- C$31,000
- D$4,000
Explanation
Opening capital = 48,000 - 18,000 = 30,000. Closing capital = 52,000. Increase = 22,000. Profit = increase + drawings = 22,000 + 9,000 = 31,000. Check: 30,000 + 31,000 - 9,000 = 52,000. So the correct answer is $31,000, which is option 3; option 1 ignores drawings.
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